Security, human rights, and international development analyst Ayyub Ibrahim delves into developments in the fledgling Economic Community of West African States project and how brewing tensions between the anglophone and francophone member states have put its flagship economic initiative at risk. This has been precipitated in part by France’s pressurising francophone member states to rush into adopting the eco, a common currency, irrespective of whether anglophone member states agree. Paris has been accused of neo-colonialism, prioritising maintaining French influence in it former empire over regional harmony and economic development.
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The Economic Community of West African States (ECOWAS), a political and economic union of 15 West African countries established in May 1975 with a mandate to develop and integrate the economies of its member states, has accrued limited benefits from globalisation. This is much like other sub-Saharan African regions but dissimilar from other regions elsewhere, due to its inordinate exclusion from globalised value chains. Trade, critical to sustainable and long-term economic growth and development, is distinctly weak in ECOWAS, which accounts for only 0.5% of all world trade, despite the wealth of natural resources in the region. In response to ECOWAS’s weak trade performance, ECOWAS’s convergence council, comprised of Ministers of Finance and Governors of Central Banks, has customarily advanced policies that further integrate the union’s economies. In September 2020, however, at the 57th ECOWAS Heads of State summit, long-standing plans for economic integration were dismissed, possibly indefinitely, as a rise in intra-ECOWAS tensions between francophone and anglophone countries put ECOWAS’s flagship economic integration initiative of a single regional currency at risk of implosion.
ECOWAS has two sub-regional blocs: the West African Economic and Monetary Union (WAEMU) and the West African Monetary Zone (WAMZ). In January 1994, members states of ECOWAS party to the West African CFA franc zone, a monetary union with a shared currency, organised to create WAEMU; a monetary, customs union, and common economic market based on the free movement of persons, goods, services, and capital. Apart from Guinea-Bissau, a former Portuguese colony that joined WAEMU in 1997, WAEMU is exclusively made up of former French colonies which have shared a currency since 1945. WAMZ, a monetary union, was established in December 2000 with the stated aim of creating a common currency, dubbed the eco, to rival the CFA franc. Once established, the eco was slated to absorb the CFA franc to create a single regional currency for ECOWAS. Excluding Liberia, which joined WAMZ in 2010, WAMZ comprises only former British colonies.
The two sub-regional blocs were in agreement as to how ECOWAS should adopt a single regional currency until December 2019, when Alassane Ouattara and Emmanuel Macron, the presidents of Côte d’Ivoire and France respectively, unexpectedly announced that WAEMU member states would abandon the CFA franc to adopt the eco in 2020 irrespective of WAMZ member states. This announcement drew heavy criticism from WAMZ member states who accused WAEMU member states of acting under the influence of their former colonisers, an allegation that is in line with popular sentiment, as France’s economic relationship with its former colonies increasingly came under fire in the months preceding the announcement.
In January 2019, Luigi Di Maio, Italy’s former Deputy Prime Minister, caused a diplomatic row when he called for the European Union (EU) to sanction France on the basis that it is “one of those countries that by printing money for 14 African states prevents their economic development”. He said that such forms of economic plunder have helped to elevate France to a top six from a top 15 world economy. The denunciation of France’s neo-colonial relationship with its former colonies by WAMZ and Di Maio is not without merit. Francophone African countries, for example, are the primary recipients of French financial aid, supplied in the form of grants, loans, direct investments, project aid, and military support which serves to engender dependency in two crucial ways: foreign aid loans make francophone African countries wedded to French debt and debt diplomacy, and reliant on receiving goods and services because accompanying knowledge transfer schemes are often inadequately provided.
The CFA franc zone, the principal tool by which France maintains its influence over its former colonies, was created when France ratified the Bretton Woods Agreement in December 1945. The CFA franc zone consists of two economic and monetary unions with two separate CFA francs: the West African CFA franc, issued by the Central Bank of West African States (BCEAO), whose members comprise the WAEMU bloc of ECOWAS; and the Central African CFA franc, issued by the Bank of Central African States (BEAC) whose members are organized under the Central African Economic and Monetary Community (CEMAC).
The relationship between the central banks of the CFA franc zone and France is based on four principles: fixed parities, an unlimited convertibility guaranteed by French Treasury, free transferability inside the CFA franc zone, and pooled foreign exchange reserves. Both the BCEAO and the BEAC maintain accounts with the French Treasury according to the following stipulations: each central bank must, a) deposit 50% of its foreign currency reserves in the French Treasury, b) be subject to France’s de facto veto power over statutory issues and implementation of monetary policy, c) commit at least 20% of its foreign currency deposits toward sight liabilities, and d) limit itself to accessing a maximum of 20% of previous year’s revenue. Principally intended to safeguard the west African CFA franc’s viability in international markets by preventing inflation spikes, currency collapse and fiscal distress, the stipulations of the CFA franc zone have generally been successful in generating greater stability and higher growth for WAEMU economies when compared with non-CFA franc zone sub-Saharan African economies.
The high stability and growth of WAEMU economies, relative to non-CFA franc zone sub-Saharan African economies, does come with some drawbacks: the stipulations of the west African CFA franc strips member states of their economic sovereignty, currency overvaluation due to the west African CFA franc’s peg to the uniquely strong euro makes exports overly expensive, and affordable credit is scarce. Therefore, WAEMU’s trade, whose member states’ economies are low-income and primarily based on agriculture, is highly dependent on privileged access to the markets of France, and by extension the EU, while inter-regional trade, a major contributing factor to strong trade performance, is particularly low, at 10%, when compared with 61% in the EU, 40% in the NAFTA zone, and 23% in the ASEAN zone.
Although WAEMU economies have enjoyed relative success thus far, in spite of the price paid in drawbacks, a structural defect makes them significantly susceptible to external economic shocks, which the early 1980s recession was instrumental in revealing. The inflexible monetary and exchange rate policy, intrinsic to the west African CFA franc, failed to offset the effects of the French franc’s appreciation against a weak dollar, large reductions in global trade, and a volatile oil market, the primary shocks of the early 1980s recession. With a greater set of fiscal tools at their disposal, above all attributable to their flexible exchange-rate policy, non-CFA franc zone sub-Saharan African economies were quicker to bounce back and retrieve economic growth by negating their domestic production collapses, increases in imports, ballooning public debt, and fiscal imbalances. WAEMU member states, meanwhile, were stagnant until 1994 when France, in consultation with the IMF, devalued the CFA franc by 50%.
In May 2020, following the December 2019 announcement by President Ouattara and President Macron, the French Council of Ministers passed bill 2986, which formally allowed WAEMU member states to abandon the west African CFA franc for the eco. The bill repeals three controversial clauses of the west African CFA franc zone: the name of the currency, “CFA franc”, will be changed to “eco”; representatives of France will be withdrawn from the central bank’s decision-making bodies; and WAEMU’s central bank will no longer be required to deposit 50% of its foreign currency reserves with the French Treasury. The bill, which has yet to be passed by either parliaments of WAEMU or of France, includes no provisions that address the central defect of WAEMU’s monetary policy as the exchange rate regime in which their currency is at fixed parity with the euro will remain in place. WAEMU member states, therefore, will likely remain subject to France.
Nigeria has been the foremost critic among WAMZ member states of the unilateral move by WAEMU member states to adopt the eco. Nigeria, as the largest economy and most populous country in Africa, has, since the decolonisation of Africa, identified France as the biggest threat to its regional ambitions. Meanwhile France, the former colonial power which ruled over many west African countries, including all four of Nigeria’s surrounding neighbours, perceives Nigeria to be the foremost threat, among African countries, to its own influence in West Africa. Nigeria interprets the unilateral move by WAEMU as a ploy by France to retain, and eventually expand, its influence in West Africa at the expense of Nigeria, whose economy accounts for two-thirds of ECOWAS’s GDP and which therefore stands to acquire a disproportionate amount of influence over ECOWAS should the eco be inclusively adopted.
Nigeria’s economy would have presumably acted as a peg for an inclusive eco; a move that would entail the Central Bank of Nigeria (CBN) giving up sovereignty of its currency, the naira, to an independent ECOWAS central bank in exchange for a dominating influence over the eco zone. Moreover, net benefits from an inclusive eco will largely accrue to Nigeria, with moderate benefits accruing to all other member states except for The Gambia which is projected to suffer net losses. By assuming an authoritative influence over the eco with WAEMU, France is undermining the decades-long work of WAMZ member states to establish the eco as a currency that would merge with the CFA franc to act as a common currency for ECOWAS. As the eco’s prospective backer, France hopes to effectively continue its management of WAEMU economies, while also integrating WAMZ member states into its fold. Nigeria, which has been hesitant to give up sovereignty of the naira in exchange for a controlling influence over the eco, is unlikely to adopt an eco backed and managed by France.
Nigeria’s criticism of WAEMU’s appropriation of the eco goes beyond politics. Excluding Togo, no other ECOWAS member states meet agreed-upon macroeconomic convergence criteria, a set of economic indicators that denote the degree of economic and structural variance among member states, purposed to make economic structures relatively uniform to ensure that economic shocks are symmetric and thus promotive of an optimum currency area. Nigeria’s primary objection, then, is that WAEMU member states, and any WAMZ member states that adopt the eco conjointly, will be entering a monetary union preordained for failure.
The most recent IMF projections, from October 2020, suggest that ECOWAS economies will contract by 2.5% in 2021. In response to the economic downturn, Ivorian President Ouattara, who has led efforts to appropriate the eco, recently announced that abandoning the CFA franc for the eco is improbable for the next three to five years. This announcement, however, must be read with apprehension in light of the attempt by WAEMU member states to appropriate the eco without meeting the convergence criteria, which suggests that economic policy is liable to be amended for political purposes. In August the former president of Mali, Ibrahim Boubacar Keita, a strong French ally, was overthrown in a coup d’état; in October, France was accused of meddling in the elections of Côte d’Ivoire in which President Ouattara won a controversial third term, and, despite France’s increasing military intervention in the WAEMU region, the security situation there is worsening as civilian deaths from terrorist attacks continue to rise. Whether further increases in economic and political instability lead WAEMU member states and France to again attempt to rebrand their neo-colonial relationship is unclear. What is clear, however, is that whether the CFA franc is abandoned for the French-backed eco in the near future or in five years, the French will have succeeded in creating a clear francophone-anglophone fissure within ECOWAS, largely to their own benefit.
Suggested e-learning courses related to this topic:
- Contemporary Issues in World Politics – University of Naples Federico II
Suggested books for -in-depth reading on this topic:
- Monetary Union in West Africa (ECOWAS): Is It Desirable and How Can It Be Achieved? (Catherine A. Pattillo, Paul R. Masson)
- The CFA Franc Zone: Common Currency, Uncommon Challenges (Anne Marie Gulde, Charalabos G. Tsangarides)
- Politics in Francophone Africa: The States of West and Equatorial Africa (Victor T. Le Vine)
Additional geopolitical reading suggestions can be found on our 2020 reading list
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Ayyub Ibrahim is an American research analyst focusing on human rights and international development who graduated from the University of Pennsylvania. Ayyub, currently a Research Fellow at the Innocence Project New Orleans, has previously supported research programs in the United States, MENA, Latin America, and Sub-Saharan Africa.
For an in-depth, bespoke briefing on this or any other geopolitical topic, consider Encyclopedia Geopolitica’s intelligence consulting services.
Cover Image: UEMOA local headquarter in Ouagadougou, Burkina Faso, Sputniktilt